Managing Tax Profiles and Registrations

Party Tax Profiles in Oracle E-Business Tax

Set up tax profiles for the parties involved in your transactions. Parties include:

All legal entities, legal establishments, and operating units in your organization that have a transaction tax requirement.

Your customers and suppliers and their locations.

Tax authorities that administer tax rules and regulations.

A tax profile is the body of information that relates to a party's transaction tax activities. A tax profile can include tax registration, tax exemptions, configuration options, main and default information, party fiscal classifications, tax reporting codes, and account tax details.

The tax registration contains information related to a party's transaction tax obligation with a tax authority for a tax jurisdiction where it conducts business. The tax registration is part of the tax profile of a first party legal establishment and a third party and third party site. A tax exemption defines, for a customer or a customer and product, a discount or replacement percentage that reduces the applicable tax. The configuration options identify the tax regimes associated with a first party and the configuration owner and service provider settings associated with each tax regime. The configuration options are part of the tax profile of configuration owners, that is, first party legal entities and operating units owning tax content. The main and default information identify characteristics of and default values for the transactions associated with a party. The party fiscal classifications optionally assigned to a party are used as determining factors in tax rules. The tax reporting codes optionally assigned to a party capture tax information from party transactions for both internal and tax authority reporting requirements. The account tax details maintain Release 11i migrated tax information for customer and supplier accounts.

Set up legal entities and establishments using the Oracle Legal Entity Manager. You can also enter tax profile and tax jurisdiction information when you create and update legal entities, as well as tax-related information for associated business entities. If you set up country defaults for the countries where you do business, then these values default to the legal entities and associated tax profiles created within the applicable country. See: Setting Up Country Default Controls for more information.

Related Topics

Updating Establishments, Oracle Financials Implementation Guide

Setting Up Parties for Self-Assessment

You can let a first party self-assess the taxes calculated on the Payables invoices it receives. A self-assessed tax is a tax calculated and remitted for a transaction, where tax was not levied by the supplier but is deemed as due (and therefore needs to be paid by the purchaser). In such cases the purchaser is responsible for calculating and remitting the tax. Self-assessment is also known as reverse charge or use tax in certain tax regimes.

When self-assessment applies to a tax line, E-Business Tax creates the recoverable and/or non-recoverable distributions, and Payables creates an additional accounting distribution to record the liability for the self-assessment.

You can set the self-assessment option:

At the tax profile level to default to the tax registrations that you create for this party.

At the tax registration level.

On an individual tax line.

E-Business Tax applies self-assessment to Payables invoices received by the first party according to the tax registration setting of the Set for Self Assessment/Reverse Charge option. The specific tax registration record that E-Business Tax uses is derived either from Determine Tax Registration rules or from the default tax registration.

Under normal circumstances, the Determine Tax Registration rules or default tax registration will derive the Bill From party as the place of supply for purchase transactions where the supplier is responsible for calculating the transaction tax and collecting it from the customer. In the case of Self Assessment, Reverse Charge, or, in the United States, Use tax, customers are responsible for self-assessing the tax. Customers will therefore self-assess under their own tax registration, and the Determine Tax Registration rules or default tax registration will derive instead the Bill To party registration. In this case, you expect to see the Set for Self Assessment/Reverse Charge option set on the applicable first party establishment registration record.

Depending on the level at which this first party establishment tax registration is created, the self-assessment will apply to:

All taxes of the tax regime, if the tax registration is defined for the tax regime only.

All tax jurisdictions of the tax, if the tax registration is defined for the tax regime and tax.

A specific tax jurisdiction of the tax, if the tax registration is defined for the tax regime, tax, and tax jurisdiction.

Setting Up a First Party Tax Profile

Set up tax profiles for your first party legal entities and legal establishments. First party legal entities identify your organization to the relevant legal authorities, for example, a national or international headquarters. First party legal establishments identify each office, service center, warehouse and any other location within the organization that has a tax requirement. When you create a legal entity, the system automatically creates a legal entity establishment. You can create additional legal establishments according to your needs. For each legal establishment there are one or more tax registrations, depending upon the tax requirements of the applicable tax authority.

Prerequisites

Before you can set up first party tax profiles, you may need to complete one or more of these tasks:

Set up legal entities and legal establishments. (mandatory)

Set up legal entity secondary establishments. (optional)

Set up tax regimes. (mandatory)

Set up taxes. (optional)

Set up tax jurisdictions. (optional)

Set up lookup codes. (optional)

Set up party fiscal classifications. (optional)

Set up tax reporting types. (optional)

To set up a party tax profile for a first party legal entity or first party legal establishment:

Navigate to the Party Tax Profiles page.

Select a first party legal entity or establishment.

Navigate to the Create Tax Profile page.

Party main information values default to all tax registrations and invoices belonging to this party. You can update these values at the tax registration level and, if authorized, at the invoice line level.

Note: The values set at the tax registration level override the values set at the party tax profile level.

Check the Set for Self Assessment/Reverse Charge box to automatically self-assess taxes on purchases.

If applicable, enter a tax classification code to use as a determining factor in tax rules for this party or party site. See: Using Tax Classification Codes for more information.

Use the event class options to review the rounding precedence hierarchy for specific applications and event classes. If you updated the rounding precedence hierarchy for a specific configuration owner and event class, then the related transactions look instead for rounding level information according to the configuration owner and event class settings. See: Setting Up Configuration Owner Tax Options for more information.

If this party intends to send or receive invoices with invoice line amounts inclusive of tax, check the Set Invoice Values as Tax Inclusive box.

This option overrides the tax inclusive handling setting at the tax level, but not at the tax rate level. See: Setting Up Tax Rates for more information.

If applicable, associate party fiscal classification codes with this party. You can use these codes as determining factors in tax rules to calculate taxes for invoices associated with this party. See: Setting Up Party Fiscal Classifications for more information.

If you associated tax reporting types with party tax profile, enter any applicable tax reporting codes. See: Setting Up Tax Reporting Types for more information.

Setting Up a Tax Authority Tax Profile

Use the Oracle Legal Entity Manager to set up each tax authority as a legal authority for transaction tax.

Set up a tax profile for each of your tax authority party records. The tax authority party tax profile identifies a tax authority party as a collecting authority and/or a reporting authority. A collecting tax authority manages the administration of tax remittances. A reporting tax authority receives and processes all company transaction tax reports.

The collecting and reporting tax authorities appear in the corresponding list of values on all applicable E-Business Tax pages. All tax authorities are available in the list of values as an issuing tax authority.

If you associated tax reporting types with party tax profile, enter any applicable tax reporting codes. See: Setting Up Tax Reporting Types for more information.

Related Topics

Legal Authorities, Oracle Financials Implementation Guide

Setting Up an Operating Unit Tax Profile

Operating units organize your company data according to your internal accounting, financial monitoring, and reporting requirements. Legal entities let you more accurately model your external relationships to legal authorities. The relationships between first party legal entities and the relevant tax authorities normally control the setup of the transaction taxes required by your business. Under most circumstances the tax setup is used and maintained based on the configuration of the legal entity.

Release 11i tax data in Payables, Receivables, and other applications migrates to E-Business Tax as operating units containing their own tax content. To help you manage the tax content of operating units, you can use the operating unit tax profile in either of two ways:

Indicate that tax setup is used and maintained by a specific operating unit; or

Indicate that operating unit tax setup is used and maintained based on the configuration of the associated legal entity at transaction time. The tax setup of the associated legal entity setup is either specific to the legal entity or shared across legal entities using the Global Configuration Owner setup. See: Configuration Options in Oracle E-Business Tax for more information.

To use the configuration of the associated legal entity, check the Use Subscription of the Legal Entity box in the operating unit party tax profile. This is an irreversible setting--once you associate the operating unit with its legal entity, you cannot update the operating unit tax profile or maintain separate tax content for this operating unit.

If an operating unit uses the application tax options defaulting hierarchy for tax classification codes, E-Business Tax continues to use this hierarchy to default a tax classification code on transactions even if the operating unit uses the subscription of the legal entity. See: Using Application Tax Options for more information.

In cases where you need to maintain tax content for an operating unit, enter and maintain the operating unit tax configuration options. See: Setting Up Configuration Options.

Setting Up a Third Party Tax Profile

Set up third party tax profiles for your customers and customer sites and suppliers and supplier sites. You can also maintain migrated tax information for your customers and suppliers for backward compatibility.

Prerequisites

Before you can set up third party tax profiles, you may need to complete one or more of these tasks:

Set up parties. (mandatory)

Set up tax regimes. (optional)

Set up taxes. (optional)

Set up tax jurisdictions. (optional)

Set up lookup codes. (optional)

Set up party fiscal classifications. (optional)

Set up tax reporting types. (optional)

Set up customer and supplier accounts. (optional)

To set up a party tax profile for a third party:

Navigate to the Party Tax Profiles page.

Select a third party or third party site.

Navigate to the Create Tax Profile page.

Party main information values default to all tax registrations and invoices belonging to this party. You can update these values at the tax registration level and at the invoice line level.

Note: The values set at the tax registration level override the values set at the party tax profile level.

Check the Allow Tax Applicability box to automatically calculate taxes for this party whenever the party acts as a supplier. You can set this option, for example, for customers that also act as suppliers on transactions.

Check the Allow Offset Taxes box to allow calculation of offset taxes with this party or party site.

You must also perform the related tasks for setting up offset taxes for the taxes involved in transactions for this third party or third party site. See: Setting Up Offset Taxes for more information.

If applicable, enter the default tax classification code to use as a determining factor in tax rules for this party or party site. E-Business Tax defaults a tax classification code to the transaction line according to the application tax options defaulting hierarchy defined for the combination of operating unit and application. See: Using Application Tax Options for more information.

Use the event class options to review the rounding precedence hierarchy for specific applications and event classes. If you updated the rounding precedence hierarchy for a specific configuration owner and event class, then the related transactions look instead for rounding level information according to the configuration owner and event class settings. See: Setting Up Configuration Owner Tax Options for more information.

If this party or party site intends to send or receive invoices with invoice line amounts inclusive of tax, check the Set Invoice Values as Tax Inclusive box.

This option overrides the tax inclusive handling setting at the tax level, but not at the tax rate level. See: Setting Up Tax Rates for more information.

Set up the tax registrations required for this party or party site:

Set defaults for all tax reporting for tax registrations of this party or party site for country, tax registration number, and tax registration type.

If applicable, associate third party fiscal classification codes with this party. The party fiscal classification codes you enter become part of tax determination for invoices associated with this party. See: Setting Up Party Fiscal Classifications for more information.

If this is a customer third party or third party site, set up the applicable tax exemptions. See: Setting Up Tax Exemptions for more information.

If you associated tax reporting types with party tax profile, enter any applicable tax reporting codes. See: Setting Up Tax Reporting Types for more information.

Account Tax Details

Use the Account Tax Details region to maintain migrated account tax information. Use the third party site Supplier Site Tax Details region to maintain operating unit supplier site tax information. Use the third party site Customer Account Site Business Purpose Tax Details region to maintain operating unit customer account ship-to site and bill-to site tax information.

For each third party and third party site, E-Business Tax only displays the fields that contain migrated data. If there is no migrated data for a particular account, then the corresponding fields are not displayed. Once you create a tax registration record for the third party or third party site, E-Business Tax no longer uses the Account Tax Details region for this party/party site.

Rounding Level (Header/Line) - This setting takes precedence over the Main party tax profile setting for invoices that apply to this third party.

Rounding Rule (Up/Down/Nearest) - The rounding rule defined at the tax registration level for a tax or tax jurisdiction that applies to transactions for this third party takes precedence over this setting.

Tax Classification - The tax classification code to use in tax determination for this third party. This tax classification code takes precedence over the Main party tax profile setting for invoices that apply to this third party.

If applicable, update third party supplier site tax details:

Operating Unit - The operating unit for this supplier site account.

Site Name - The name of the supplier site.

Tax Registration Number - The supplier site tax registration number.

Allow Offset Taxes (Yes/No) - If you set this option to Yes, then you must set up offset taxes for the taxes that apply to transactions for this operating unit and supplier site. See: Setting Up Offset Taxes for more information.

Rounding Rule (Up/Down/Nearest) - The rounding rule defined at the tax registration level for a tax or tax jurisdiction that applies to transactions for this operating unit and supplier site takes precedence over this setting.

Set Invoice Values as Tax Inclusive (Yes/No) - If you set this option to Yes, the same option setting at the tax registration level for a tax or tax jurisdiction that applies to transactions for this operating unit and supplier site takes precedence over this setting.

Tax Classification - The tax classification code to use in tax determination for this operating unit and supplier site. This tax classification code takes precedence over the Main party tax profile setting for invoices that apply to this operating unit and supplier site account.

If applicable, update third party customer account site business purpose tax details:

Operating Unit - The operating unit for this customer site account.

Account Number - The customer site account number.

Tax Registration Number - The customer site tax registration number.

Rounding Level (Header/Line) - This setting takes precedence over the Main party tax profile setting for invoices that apply to this operating unit and customer account site.

Rounding Rule (Up/Down/Nearest) - The rounding rule defined at the tax registration level for a tax or tax jurisdiction that applies to transactions for this operating unit and customer site account takes precedence over this setting.

Tax Classification - The tax classification code to use in tax determination for this operating unit and customer site account. This tax classification code takes precedence over the Main party tax profile setting for invoices that apply to this operating unit and customer site account.

Geography Type Classification - If previously defined, this field displays the migrated geography type of the Receivables condition sets or group constraint for this operating unit and customer site account.

Setting Up Tax Exemptions

Set up tax exemptions for your third party customers and customer sites. A tax exemption is a discount/surcharge or replacement percentage from the base tax rate that reduces the applicable tax on a Receivables transaction.

A tax exemption usually applies to a specific customer or to a combination of customer and specific product. For example, in the United States the Federal Government acting as a customer is exempt from tax on direct sales; and many states provide exemptions on sales of necessities such as food and clothing. A tax exemption record often includes an exemption certificate document number. Tax authorities provide such documents to certify that a customer, customer site, or product is either partially or fully exempt from a tax.

You create a separate record for each tax exemption that applies to the third party customer or customer site. A tax exemption record identifies the nature of the exemption, the configuration owner and tax regime, and, where applicable, the related tax, tax status, tax rate and tax jurisdiction to which the exemption belongs. Because tax exemptions apply only to specific transactions of a legal entity or operating unit, you cannot use the Global Configuration Owner to share tax exemption records.

You can enter exemption information for a customer while the customer's application for the exemption is in progress, and use the exemption reason and exemption status to monitor the exemption. If applicable, E-Business Tax considers the exemption certificate number, exemption reason, and exemption status during tax calculation. See: Managing Tax Exemptions for more information.

Note: Exemptions are applicable only at the party site level for ship-to. Bill-to exemptions are applicable only when the exemption is defined at that party level.

To set up tax exemptions for a third party, you must complete the appropriate exemption setup for the tax regimes and taxes concerned:

Set the eBTax: Allow Override of Customer Exemptions profile option to control the display of the Tax Handling field on the transaction line. See: Setting Profile Option Values, Oracle E-Business Tax Implementation Guide for more information.

Set the Allow Tax Exemptions option at the levels that correspond to the tax exemption. For example, if the exemption refers to the tax status of a particular tax, then you must set this option at the tax regime, tax, and tax status levels.

For each applicable tax, indicate whether you are creating tax exemptions for the tax, or using tax exemptions previously created for an existing tax. You would use the tax exemptions of an existing tax, for example, in the United States when county and city taxes use the tax exemption of the state tax, if the state tax exemption applies to all cities and counties in the state. See: Setting Up Taxes for more information.

Verify that the applicable event class allows tax exemptions. If it does not, then set up configuration owner tax options for the applicable configuration owner and event class to include tax exemptions. See: Setting Up Configuration Owner Tax Options for more information.

You can create more than one tax exemption for the same customer and tax regime combination. You may need to do this, for example, if one exemption applies to a specific tax, while other exemptions apply to specific products for specific tax rates and jurisdictions. At transaction time, E-Business Tax applies the most specific tax exemption to the transaction. See: Managing Tax Exemptions for more information about tax exemption handling.

Prerequisites

Before you can set up tax exemptions, you may need to complete one or more of these tasks:

Set up customer third parties. (mandatory)

Set up tax regimes. (mandatory)

Set up configuration options. (mandatory, if required by the event class)

Set up taxes. (mandatory, for exemptions for a specific tax)

Set up tax statuses. (mandatory, for exemptions for a specific tax status)

Set up tax rates. (mandatory, for exemptions for a specific tax rate)

Set up tax jurisdictions. (mandatory, for exemptions for a specific tax jurisdiction)

Set up exempt reason lookup codes. (optional)

Set up inventory organizations. (mandatory, for product exemptions)

Set up inventory items. (mandatory, for product exemptions)

To set up a tax exemption:

Navigate to the Customer party tax profile.

Select the third party/site and navigate to Tax Exemption tab.

If applicable, enter the certificate number that applies to this exemption.

Select the customer's exempt reason.

You can use the exempt reason lookup type to add exempt reasons according to your requirements. See: Setting Up Lookup Codes, Oracle E-Business Tax Implementation Guide for more information.

Select the exempt status:

Discontinued - The exemption no longer applies. You set this status to an exemption that previously had the status Manual or Primary. A discontinued exemption is not considered during tax calculation.

Manual - The exemption is approved by the tax authority and applies to specific transactions only. E-Business Tax considers a manual exemption during tax calculation provided the exempt reason and certificate number entered on the transaction line match the exemption record values.

Primary - The exemption is approved by the tax authority and applies to all of this customer's transactions.

Rejected - The customer's application for this exemption was rejected by the tax authority. You set this status to an exemption that previously had the status Unapproved. A rejected exemption is not considered during tax calculation.

Unapproved - The customer's application for this exemption is not yet approved by the tax authority. E-Business Tax considers an unapproved exemption during tax calculation provided the exempt reason and certificate number entered on the transaction line match the exemption record values.

Enter the tax regime and configuration owner to which this tax exemption belongs.

Enter the tax, if this exemption refers to a specific tax. If defined, this exemption applies to the tax belonging to the party registration.

If applicable, enter the tax status, tax rate, and tax jurisdiction for this tax exemption.

If this is a product-specific exemption, enter the inventory organization and inventory item.

Enter the tax authority responsible for issuing the tax exemption.

If this exemption is for a specific tax, check the Apply to Lower Levels box to apply this exemption to all taxes that use this tax as the tax exemptions source. See: Setting Up Taxes for more information.

Enter the effective date range for this tax exemption. Enter a date range that is within the effective period of the entities related to this tax exemption: tax regime, tax, tax status, tax rate, and tax jurisdiction.

Select the method of calculating the exemption percentage:

A Discount/Surcharge decreases/increases the original rate by the percentage you enter.

A Special Rate percentage replaces the original rate.

Enter the rate percentage to use for this tax exemption.

Setting Up a Tax Registration

Set up tax registrations for your first party legal establishments and your third party customers/customer sites and suppliers/supplier sites. A tax registration contains information related to a party's transaction tax obligation with a tax authority for a tax jurisdiction where it conducts business. In some cases a single location may need to file multiple registrations.

E-Business Tax uses tax registrations in tax determination and tax reporting. For each tax that you create, you must define either a default tax registration or a tax rule for the rule type Determine Tax Registration. This rule determines under which tax registration a transaction is processed. See: Determine Tax Registration for more information.

You must set up a separate tax registration to represent each distinct registration requirement for a first party, including:

Each legal establishment that is required to file tax documents.

Each tax regime, where the registration is used for all taxes within the regime.

Each tax within a tax regime that has a separate tax requirement, where the registration is used for all jurisdictions where the tax is applicable.

Each tax jurisdiction that has a separate tax requirement for a tax registration.

Each tax for which the party is Not Registered, if the Not Registered tax registration status is used as a tax condition in tax rules.

If a party has more than one tax registration under the same tax regime, then E-Business Tax considers the tax registrations in the order: jurisdiction; tax; tax regime.

You optionally set up tax registrations for your customers and suppliers, as necessary, to support specific tax regulations or reporting requirements.

You can also create new registration records to update an existing registration with current information, for example, when a tax registration expires, when a company acquires a different tax registration number, or when the tax authority changes the laws regarding registration.

Prerequisites

Before you can set up tax registrations, you may need to complete one or more of these tasks:

Set up tax regimes. (mandatory)

Set up taxes. (optional)

Set up parties. (mandatory)

Set up party tax accounts. (optional)

Set up bank accounts. (optional)

Set up lookups for registration type, status, and reason. (optional)

Set up tax jurisdictions. (optional)

Set up tax authorities. (optional)

To set up a tax registration:

Select a first party legal establishment, or a third party or third party site.

Navigate to the Create Tax Registration Details page.

Enter the tax regime for this registration.

If necessary, enter the tax and tax jurisdiction for this registration.

Enter the company's registered name in the Company Reporting Name field, if the registered name is different from the company's trade name.

If applicable, enter the tax registration type.

The seeded tax registration types CPF, CNPJ, and OTHERS are used in tax registration number validation for Brazil. All other tax registration types are for reporting purposes only.

Enter the company tax registration number. Where applicable, E-Business Tax validates the number according to tax authority validation rules.

If you set the tax regime option to use the legal registration number as the tax registration number, then select the registration number from the legal registration numbers in the list of values.

If you set the option Allow Duplicate Tax Registration Numbers for the tax, then multiple parties and party sites can use the same tax registration number for this tax. See: Setting Up Taxes for more information.

Enter the party's legal registration address for this tax registration.

Enter the party's tax registration status. You can use tax registration status as a determining factor in tax rules.

E-Business Tax provides these seeded registration statuses:

Agent - The party acts as a withholding agent for the tax authority for the applicable tax.

Registered - The party is registered for the applicable tax.

Not Registered - The party is not registered for the applicable tax.

Use the Source field to identify this registration as implicit or explicit.

An explicit tax registration means that the party is registered with the local tax authority and has a tax registration number. An implicit tax registration means that the party is not formally registered with the tax authority, but the party is considered to meet one or more requirements for reporting taxes because of the level of business conducted, typically a minimum presence in the country and/or a minimum revenue threshold.

Enter the tax authority responsible for issuing tax registration numbers for this registration.

If necessary, enter a tax registration reason to use for tax reporting purposes, for example, to indicate the reason for an implicit registration.

Enter the effective dates for this registration.

Check the Set as Default Registration box to use the tax registration number associated with this registration as the default tax registration number on all tax reports.

If necessary, update the values in the Invoice Controls region that default from the party tax profile as required by this tax registration.

At transaction time, the values set at the tax registration level override the values set at the party tax profile level.

Set up bank account details for this registration if the tax authority requires bank account information on tax registration reports.

If defined, the reporting and collecting tax authorities default from the tax jurisdiction associated with this registration. If necessary, enter or update these fields with tax authorities specific to this tax registration.

Setting Up Country Default Controls

Set up information at the country level that you want to default to the applicable E-Business Tax and legal entity setups. Country default controls let you designate transaction tax-related values in the countries that you do business. You can update these default values on the applicable pages.

The list of values in the country default control fields each contain all of the values that you have previously set up. For tax regimes and taxes, the list of values is restricted to the country-specific values. You should ensure that you have completed all of your applicable setup before setting country default controls.

You can set up these country default controls:

Product fiscal classifications:

Oracle Inventory category set

E-Business Tax product category (non-Inventory based)

Product intended use (Inventory based and non-Inventory based)

Party tax profiles:

Rounding Rule

Tax Registration Type

Tax Registration Status

Collecting Tax Authority

Reporting Tax Authority

Issuing Tax Authority

Tax regimes

Taxes

Product fiscal classification defaults define the default values used at transaction time on transactions belonging to parties in the applicable country.

Party tax profile default control values default to the legal entity registrations and party tax profiles belonging to all parties in the applicable country.

Tax regime and tax default control values default to the tax registrations belonging to legal establishments in the applicable country. If you enable the available option, these default control values also default to imported invoices.